By November 1972, Agha Hasan Abedi had quit as president of
United Bank and started doing business as the Bank of Credit and Commerce
International out of offices in Abu Dhabi and Karachi. With him had come
Swaleh Naqvi and a handful of other United Bank employees. Masihur Rahman
had declined Abedi's offers to join the new bank, despite promises that he
would be a millionaire within a decade.
The bank's working capital included the $2.5 million from the
Bank of America and an unknown amount of money from its Arab stockholders,
such as Zayed and Adham. The Arabs also became the bank's first
depositors, providing about $20 million as the bank's initial cash. Abedi
had also succeeded in hiring away several of his associates at Habib. They
formed the nucleus of the new bank's staff, which would always be
Some of the early customers also reflected Abedi's heritage. The
Saigol family, who had staked him in United Bank, were among the first
depositors and borrowers at the new bank. More significant among the first
customers were three brothers, Mustafa, Abbas, and Murtaza Gokal.
Like Abedi, the Gokals were Shiite Muslims. They had been born
in India but moved with their family to Iraq. When the monarchy was
overthrown in Baghdad in the late 1950s, the family had escaped to
Karachi. The brothers had set up a company called Gulf Group, and its
chief operating arm, Gulf Shipping Lines, had been started in 1969. The
company started as little more than a tramp operation carting bulk cargoes
through the Arabian Sea out of Karachi. Their first big contract was to
haul cement to the Middle East and Africa; Gulf Shipping specialized in
shipping to places where others were not interested in doing business.
But the brothers were driven by the vision of creating an
international shipping empire and they had quickly expanded beyond the
Third World. By the time Abedi founded BCCI, the Gokals were familiar
figures in London and Geneva and seemed to have broken free of their
confining world in precisely the way that Abedi envisioned for BCCI.
From the outset, Abedi stressed that, no matter how large it
became, the bank should be viewed not as a business but as a family. He
urged everyone, from tellers to executives, to bring in new business.
Everyone would benefit in the end. So junior employees and senior ones
alike were prepared to work for comparatively low salaries and were
encouraged to work long hours and come in on weekends.
"We gave our all for BCCI," one employee later
explained. "We were told it was a family bank which looked after its
employees. We were told our sons would come and work for the bank."
Abdur Razzak Sakhia, a Pakistani who became global marketing
director for BCCI, describes BCCI in those early days as "a culture
of the East." As far as possible, the bank promised lifetime
employment. "It was," says Sakhia, "a marriage for life,
fitting the Eastern stable society, not Western mobile, transient
Abedi was referred to among employees as "Agha Sahib"
and "the godfather," the latter phrase used not in the American
sense of a mob chieftain, but in the sense that he represented a type of
"He made the other person feel that he, Abedi, was the
servant, the other person was a god," said Sakhia. "Although
when we sat with him at conferences, we felt we were sitting with a
'~ue to his vision, Abedi did not institute a rigidly
centralized management structure. Instead, he created a series of
committees to oversee the various aspects of the bank's business and
development. There was a general committee, which was given the task of
promoting the bank's basic concept and its management philosophy. A
financial committee supervised credit and lending policies, while the
development committee examined ways to expand and the administration
committee implemented personnel policies. Only Abedi, as president, had a
The bank's early growth was concentrated in the Gulf region,
where Abedi could take advantage of his contacts. Roy Carlson, who was
supervising the Bank of America's investment and trying to develop
contacts, often took business trips with Abedi.
"You didn't make calls in offices. That was not the way
business was done in the Middle East," Carlson said later. "Mr.
Abedi would arrange luncheons, dinners, and receptions at which I would
meet some of the bank's customers or potential customers. He had many
strong ties there from his previous years. But there also were always new
people being courted as well."
These affairs were very Middle Eastern. Often Carlson found
himself seated on the floor of an ornate palace, sipping sweet tea from
small silver cups. Arrayed around him would be a half dozen or more men
dressed in thobes, the long, flowing, shirtlike garment, and ghutras, the
traditional Arab headdress. Sometimes during these long sessions the
conversation would be pierced by a high-pitched wail: "Allah Akbar"-
God is great. With the call to prayer, the men would kick off their
sandals and kneel in lines on small rugs, facing Mecca and chanting their
At any bank in the world, wealthy customers are treated
differently from the everyday clientele. In the Arab world, where royal
treatment is more than just a phrase, this practice often involved
courtesies such as bestowing gifts on valued customers and performing a
large number of personal services. Banking was a very personal business.
Carlson had lived in the Middle East himself, so he did not find
these gatherings and frequent gifts a strange way to conduct business.
Indeed, he was an admirer of the Arab people and their distinct language,
dress, behavior, and thoughts. If neither he nor Abedi ever felt quite at
home among them, they also never dismissed them simply because they did
business in a different way.
The fledgling Bank of Credit and Commerce was positioned
perfectly to take advantage of the events of 1973. The Persian Gulf region
was about to become the wildest frontier in banking, and Agha Hasan
Abedi's vision of a vast banking empire was about to get a jump start.
The riches of the region had been controlled for forty years by
such Western companies as Standard Oil and Royal Dutch Shell. They doled
out a percentage of the profits to the sheiks who owned the land and
retained the bulk of the money for themselves. Perhaps more important ly,
the Westerners controlled the quantity and price of the oil that came from
the vast reserves beneath Arabia.
Gradually, however, the Arabs had recognized that oil was a
weapon they could use. They first tried to exploit it following Israel's
victory over Egypt in 1967's Six-Day War, but the efforts to reduce
shipments to the West were a dismal failure. The next time, the story was
In 1973, when Egypt attacked Israel in an attempt to redeem its
honor, Egyptian President Anwar Sadat had the promise of Saudi Arabia's
King Faisal, Abu Dhabi's Sheik Zayed, and other potentates that they would
assist him by restricting oil. Indeed, it had been Zayed who first
advocated the oil embargo as a weapon against the West. Ten days after the
war began on October 3, 1973, oil sales to nations supporting Israel were
stopped. The oil embargo would last until the spring of 1974.
The embargo exposed the West's critical dependence on Arab oil.
Even after the end of the embargo, things were never the same. The Arab
nations and Iran, through the Organization of Petroleum Exporting
Countries, exploited this dependence and sent the price of crude oil
skyrocketing. By the end of 1974, the price had quadrupled to $11.65 a
barrel. The Gulf was swimming in money, and its leaders needed
sophisticated moneymen to help them spend it.
The entire Gulf became a giant boom town. Foreigners flooded
Saudi Arabia and the smaller nations, offering their services for the
instant millionaires and billionaires. Virtually all of the money in these
feudal countries flowed into the royal treasuries. In the words of Khalid
Abu Su'ud, a financial adviser to the crown prince of Kuwait at the time,
"Petromoney is government money." And the governments were the
members of the royal families. Real opportunities lay with those who had
access, men such as Abedi.
As fast as the oil money was flowing in, the Bank of Credit and
Commerce was growing even faster. The bank had been only a year old when
the oil embargo started, but already it was operating in four Gulf states
and had opened its first office in Britain. There, it was intent on
catering to the large Pakistani and Asian populations. Its first branches
were in Bradford, Birmingham, Wolverhampton, and London's Southall
district, all areas with large immigrant populations. The offices were
friendly and inviting, a sharp contrast to the aloof British institutions.
But as the Middle Eastern oil producers grew richer, Abedi
focused his growth on a different "ethnic" clientele in London,
which was becoming a favorite vacation spot for the newly rich Arabs.
Between 1973 and 1974, BCCI branches began popping up in much fancier
neighborhoods of London, such as a plush premises in Kensington High
Street in the West End, a large branch along Cromwell Road, and a
marble-and-glass office on Sloane Street in the heart of the fashionable
Knightsbridge shopping district. Nearly half a million dollars was spent
refurbishing 3,000 square feet of splendid space on Wigmore Street, space
that had once belonged to the staid National Westminster Bank. The
branches boasted lavish Mediterranean architecture and the signs posted in
them were in Arabic and Farsi.
A new unit was formed within the bank to target "HNWs,"
people with high net worths. Another new division, the one that gathered
the deposits that really fueled the growth, was called the "Middle
Eastern Mobilisation Unit." It catered to the whims of visiting
sheiks, and a fleet of Rolls-Royces from BCCI was often lined up at
London's Heathrow Airport waiting for arriving customers.
Rumors began to circulate about the unconventional treatment af
forded the bank's wealthy customers. Perhaps they were true. Perhaps they
were stoked by resentment toward the Arabs and their dark skinned bankers.
Whatever the truth, many of the bank's competitors complained that BCCI
was stealing their biggest customers with its aggressive and questionable
"If you want five hundred thousand pounds in a suitcase on
a Sunday night, a little guy from BCCI will come along with it. You won't
get that at Lloyds," said one competitor.
Other rumors were more vicious. There was talk of flight capital
transferred clandestinely out of Pakistan, India, and other nations where
tight currency restrictions kept wealthy citizens from moving their money
abroad. Word spread that BCCI happily provided prostitutes for visiting
Arabs. Loans of millions of dollars were supposedly made on a simple
request from this or that sheik. An internal bank memo support ing a major
loan might read, "Obviously the sheik is good for a million
dollars," according to one of the Bank of America executives trying
to monitor BCCI's growth.
One of Abedi's lieutenants in London, Ameer Siddiqui, responded
to such criticism by telling a Forbes magazine reporter in 1978: "We
are attuned to the Arab way of working. Arabs want personal service, Asian
courtesy at its zenith. So you visit them at home on occasion. Send them
little gifts. They couldn't care less about the gifts. It's the thought.
With all due respect to The British Bank of the Middle East or Chartered
Bank, they are practicing the English type of banking. Their theory is,
'The customer should come to us.' The theory here is, 'Why should the
customer come to us? We should go to the customer."'
Nowhere was that personal service better exemplified than in
Abedi's relationship with Sheik Zayed, his initial patron. It was an
association that provided Abedi with much of the illusion central to
BCCI's growth for nearly two decades: that BCCI was always solvent because
it was backed by seemingly limitless Arab oil money.
Abu Dhabi was among the most feudal of the Persian Gulf
emirates. The ruling al-Nahayan controlled all of the wealth that came
from oil. When the oil revenues had grown so sharply, Zayed began a major
building program, dotting the bleak desert landscape with roads that led
to nothing but more desert and grand buildings that often stood empty. He
also recognized the necessity of becoming a more sophisticated investor
and one of the things he did to further this end was to increase his
reliance on Abedi and BCCI. Abedi returned the favor by playing a role in
helping the sheik retain power. Zayed reportedly had fourteen wives and
forty-one children plus assorted brothers and other relatives to keep
happy. Indeed, staying in power depended in part on sharing the wealth
with his relatives. A Pakistani banker who did not work for BCCI later
recalled how well-dressed employees of BCCI would be dispatched every
month to deliver a briefcase of cash to each of the sheik's brothers.
On New Year's Eve in 1973, Bhutto had delivered a speech
praising the private sector and promising that no more industries would be
nationa lized. The very next day, his government took over Pakistan's
banks, nearly two years after Abedi had predicted it would happen. Far
from a calamity for Abedi, it proved a boon, for it provided him with a
ready pool of able Pakistani bankers for BCCI; since 1974, Abedi had been
hiring as many as he. could recruit. Even Masihur Rahman finally joined
BCCI after the nationalization.
As Abedi assembled his senior staff, a pattern emerged. Abedi
came to rely not just on Pakistanis, but on a group called Mohajir, men
who, like himself, had immigrated to the new Islamic nation during the
partition of British India. Rahman, a Bengali, never really joined the
inner circle. The Mohajirs dominated commerce and finance in Pakistan,
largely because the country's quota system for native ethnic groups left
them little outlet in the civil service or the military. Not fully a part
of the new land, they were ripe to transfer their emotional attachment to
their employer, a bank that was spreading everywhere but was rooted
Abedi's family was growing dramatically. BCCI was becoming a
truly international bank. "Mr. Abedi's dream was that we should
become the biggest bank of the world in twenty-five years," recalled
one of his first aides, Muzaffar Ah Bukhari. "He used to say that in
our meetings and conferences. He used to look ahead. Not two years, three
years, or five years, but twenty or twenty-five years. And he used to ask
'Where do you see the bank after fifty years?' And the planning
was done accordingly."
A symbolic story that swept through the ranks of BCCI in the
mid-i 970s captured the spirit and arrogance of the bank: According to the
story, Abedi supposedly disagreed with a Bank of America manager over the
pace of the bank's growth. "You are counting the grains of
sand," Abedi reportedly said, "while I am seeing the entire
The Americans were not the only grain counters. The same
Pakistani banker who had walked out on Abedi muttering
"bullshit" years earlier watched his lavish marketing with great
puzzlement. How does Abedi make his money? he wondered aloud in a meeting
with Pakistan's minister of finance in the late 1970s. The finance
minister said nothing, and one day not long after the conversation the
minister's son showed up as a senior officer at BCCI.
The speed of its expansion was alarming to some executives with
the Bank of America as well as to some bankers on the outside. The Bank of
England expressed concern as the number of BCCI branches in Britain rose
to double figures in 1976, with plans for further expansion announced.
Even though BCCI had moved its corporate offices to London,
there was little that the regulators at the British central bank were
willing to do. And doing anything would have required a legal stretch by
the regulators, for Abedi had foreseen the possibilities of a reaction
against his empire and had made arrangements to locate his legal
headquarters in two countries known to have the barest of regulatory
interference. Control over the British branches, and all of the bank's
other branches for that matter, was divided between Luxembourg, a tiny
duchy in Europe, and the Cayman Islands in the Caribbean.
Bank of Credit and Commerce International SA was registered in
the Caymans in 1975. It functioned as the principal banking subsidiary of
BCCI Holdings SA, which had been established in Luxembourg in 1972.
Beneath these two umbrella groups, Abedi had begun forming a bewildering
array of additional companies and banking entities. The guiding principle
seemed to be this: Make BCCI offshore everywhere.
Both Luxembourg and the Cayman Islands were long-time bank
secrecy havens, part of a small fraternity of nations that lure financial
institutions of all stripes with the promise that their books would be
closed to nosy outside regulators and law enforcement officials. In
exchange, these countries receive big boosts to their economies. In
Luxembourg, the financial services industry had grown so vital to the
economy that it accounted for a fifth of the government's revenue and
employed more workers than any other sector of the economy. Yet the
country has never employed more than fifteen bank examiners, and
Luxembourg does not even regulate bank holding companies because they are
not considered banks.
There are legitimate reasons for major corporations to set up
subsidiaries and affiliates in countries that offer tax and secrecy
advantages. What made BCCI highly unusual was that it was a financial
institution set up in two offshore countries, which meant that no single
regulator could ever see the total picture of the bank's worldwide
operations. The possibilities for financial trickery, such as shifting
loans between the two holding companies to conceal problems, were quite
real. From the point of view of, say, the Bank of England, this situation
was cause for alarm. Much of the growth was occurring on the Old Gray
The Bank of England has never been a lion-hearted regulator.
Unlike the Federal Reserve Board or Office of the Comptroller of the
Currency in the United States, the British regulator does not have its own
staff of examiners. Rather, it must rely on outside auditors, the same
firms employed by the banks it is regulating. Furthermore, prior to 1978,
the Bank of England had very limited powers to supervise bank operations
in any event.
Nonetheless, British law would have allowed the Bank of England
to assert control over BCCI's financial operations if the regulators deter
mined that their counterparts in other countries were not doing the job
properly. In this case, however, the British chose to defer to Luxembourg
and the Cayman Islands despite concerns about the institution's rapid
Hearts were beating a little faster on the other side of the
Atlantic, too. Executives at the Bank of America were concerned about the
seemingly unchecked growth of their Middle Eastern partner. Huge loans
were being made on a signature and a smile. Offices were sprouting in new
countries faster than oil wells in the desert. The rumors about the way
BCCI conducted its business had been passed along to San Francisco by bank
people in the field and, naturally, by a host of competitors eager to cast
suspicion on the upstart institution. Unlike the Bank of England, however,
the Americans were in a position to act on their growing trepidation.